Drilling revenue increased over 180% sequentially, sand revenue increased over 129% sequentially, and accommodations delivered another strong quarter, with revenue up 25% sequentially. The improvement in profitability was driven by a combination of higher revenue fall-through—particularly in rentals and accommodations—along with continued discipline on the cost structure, with SG&A of $3.6 million, a 38% decrease sequentially. Putting SG&A into longer perspective, we have taken our SG&A run rate from approximately $25 million in 2024 to $20 million in 2025, and we now have line of sight to an annual run rate of approximately $11 million to $12 million as the work on structural cost continues to take hold.
The cost trajectory is the result of deliberate work sharing services more efficiently across the platform, and maintaining strict discipline on spend. In accommodations specifically, we generated gross margins of approximately 40%, the highest level in the past five quarters, reflecting both improved utilization and the operating leverage that comes with it. While we are encouraged by the progress, there are still areas where we see meaningful opportunities for improvement. In drilling, revenue improved significantly versus the fourth quarter; however, margins were pressured by higher operating costs, with a portion of these being front-loaded in nature, particularly on the maintenance side.
As context, drilling delivered the highest gross margin in the segment’s history in 2025, before timing-related items affected the fourth quarter. The first quarter saw activity rebound on that base. With utilization building, costs normalizing, and planned capital deployment improving our operating efficiency, we expect margins to expand through the year and the segment to reach EBITDA positive in 2026. In sand, while volumes and revenue improved meaningfully, margins remained below our expectations. This business is leveraged to activity in the Montney, and we expect performance to track with that market. Our internal focus continues to be on operational efficiency and pricing capture as activity increases. In infrastructure, demand—particularly for fiber—remains intact.
The new leadership team we put in place is making progress, and as the operational changes take hold, we expect financial performance to improve. This is our smallest segment today, but one where we see meaningful long-term potential. What we are starting to see now are real proof points that the transformation strategy is working: a more focused portfolio, improving utilization, better capital allocation, and a cost structure aligned with the current scale of the business. With that, I will turn it over to Bernard to walk through the operational performance in more detail.
Bernard Lancaster: Thanks, Mark, and good morning, everyone. When we spoke in March, I told you Q4 was a mixed quarter—pockets of real strength with execution and cost control that did not meet our standards. We own that, and we laid out the specific actions underway: top-down management changes in the fiber business, heightened project oversight, and a more strategic approach to customer and fleet mix in non-aviation rentals. The first quarter results provide early evidence that those actions are working across most of the platform. We have seen clear improvement in our operational trajectory, and the demand backdrop we outlined last quarter has held up. Let me walk through it segment by segment.
Starting with rentals, this segment continues to be the primary driver of growth for the company. In equipment rentals, we had an average of 389 pieces of equipment on rent during the quarter, compared to 328 in Q4 2025 and 231 in Q1 2025. The customer and fleet mix work we discussed on the Q4 call is starting to flow through, and demand across our gas-weighted basins remains strong. In aviation, we ended the quarter with 27 assets in the fleet, of which 21 were generating revenue. Utilization continues to trend positively, and we expect further improvement as we place additional assets on lease over the coming quarters, subject to maintenance schedules and customer delivery timing.
I would again like to reiterate that there is still meaningful runway here. In accommodations, we saw another strong quarter. Nights on rent in Q1 were 24,778 compared to 21,384 in Q4 and 16,108 in Q1 of 2025. That reflects continued strength in customer activity and improved occupancy which, combined with operating leverage, drove the 40% margin. As Mark referenced earlier, this was the strongest result this segment has delivered in five quarters. This team has consistently performed at an exceptional level quarter after quarter, and they deserve significant recognition for their unwavering execution. In drilling, activity increased meaningfully compared to Q4 and 2025.
This represents significant advancement in the right direction, maintaining momentum as we anticipate ongoing growth and activity throughout the year. Sand showed significant top-line improvement, with revenue up 129% sequentially from Q4 2025. We sold approximately 156,000 tons at an average price of $19.49 per ton. Volumes are clearly recovering off the Q4 low, and we are also making progress on the railcar lease optimization we flagged on the Q4 call. As Mark said, pricing remains competitive and margin improvement is paramount, but operationally we are headed in the right direction. Sand is leveraged to activity in the Montney, and while the market has shown improvement, we have more work to do on our margin conversion. That remains a priority.
Finally, in infrastructure, activity levels remain modest with revenue of approximately $300,000 in the quarter. The new leadership team in fiber is making the changes we said they would—tighter project oversight, better cost discipline, and a more selective approach to the projects we take on. The operational foundation is continuing to improve, but with the capital investment we made during the first quarter into our fiber optic fleet, we expect to be better positioned to pursue and execute on the work that is in front of us as meaningful demand continues to build.
Overall, we are seeing improving activity levels across multiple segments, and the operational issues we flagged on the Q4 call are tracking in the right direction, with the first quarter starting to show the impact of the changes we have been making. With that, I will turn it back over to Mark.
Mark Layton: Thanks, Bernie. Let me walk through our segment results for the first quarter of 2026 and then I will cover the consolidated results, balance sheet, capital allocation, and our outlook. Rental segment revenue was $13 million, up approximately 294% sequentially and up 584% year-over-year, mainly driven by a full quarter of contribution from the aviation assets we deployed throughout 2025, the $6.5 million sale of an aviation APU that was not on lease, along with continued strength in non-aviation rentals. Segment profitability improved meaningfully on the back of higher revenue fall-through and the customer and fleet mix actions Bernie referenced.
Accommodation segment revenue was $3.5 million, up approximately 25% sequentially and up 67% year-over-year, reflecting higher occupancy and continued cost discipline. Gross margins of approximately 40% were the highest in five quarters, driven by both utilization and operating leverage. Drilling segment revenue was $1.4 million, up 180% sequentially and 600% year-over-year, as utilization stepped up 20% from low single digits in the fourth quarter of 2025. Margins were pressured by higher operating costs in the quarter, but with activity continuing to build we continue to expect drilling to move toward positive EBITDA during 2026.
Sand segment revenue was $3.9 million, up 129% sequentially, reflecting a meaningful step-up in volumes off the Q4 low watermark, partially offset by a year-over-year decline in average sales price as a result of an increased proportion of coarse grade sand. Segment margins remained below our expectations, and operational efficiency and railcar fleet rationalization remain the focus areas. Infrastructure segment revenue was $300,000, reflecting the operational reset underway in our fiber business. We expect an EBITDA overhang throughout 2026, consistent with what we communicated last quarter. Importantly, during the quarter, we made our first meaningful capital investment in this segment as we invested $1.9 million into our fiber optic fleet.
The demand backdrop for fiber is compelling, and this investment is about ensuring we have the capacity and equipment to execute on that opportunity as it develops in the back half of the year and into 2027. Turning to our consolidated results, first quarter 2026 total revenue was $22 million compared to $9.5 million in Q4 2025 and $11.6 million in Q1 2025, an increase of 133% sequentially and 90% year-over-year. Net income from continuing operations was $4.7 million, or $0.10 per diluted share, compared to a net loss of $12.3 million, or $0.26 per diluted share, in Q4 2025, and a net loss of $2.2 million, or $0.05 per diluted share, in Q1 2025—significant improvement from prior periods.
Adjusted EBITDA from continuing operations was $1.9 million compared to a loss of $6.8 million in Q4 2025 and a loss of $2.3 million in Q1 2025. As I mentioned at the outset, this is the first positive EBITDA quarter since 2024—two years ago—and prior to the strategic transactions that took place during 2025. The first quarter results were driven by the fall-through from higher rental and accommodations revenues, disciplined cost management, and favorable insurance adjustments of $1.6 million. SG&A expense was $3.6 million in Q1 2026 compared to $5.7 million in Q4 2025 and $4.1 million in Q1 2025.
We continue to target an annual SG&A run rate of approximately $11 million to $12 million as the work on structural cost takes hold. Turning to balance sheet and liquidity, Mammoth Energy Services, Inc. remains debt free with a strong balance sheet position. We ended the quarter with unrestricted cash, cash equivalents, and marketable securities of $125.1 million. Capital expenditures in the first quarter were $11.7 million, with $9.3 million of that going into rentals. The majority of the rentals CapEx went into aviation assets as we acquired two APUs during the quarter for $6.6 million.
In addition, $1.9 million went into the infrastructure services segment for our fiber optic fleet and $400,000 of maintenance CapEx in our sand and accommodation segments. Subsequent to quarter-end, we have deployed an additional $25.7 million for aviation assets to acquire six engines. We expect four of the six to go on lease during the second quarter. With these additions, we now have just over $90 million deployed in our aviation portfolio. As I mentioned earlier, we also monetized an aviation APU at a 20% gross IRR after a roughly two-quarter hold and recycled that capital into another aviation asset where we see a stronger return profile.
This is the philosophy we have articulated surrounding our portfolio of businesses and assets. Every asset has to earn its place in the portfolio, and we will be a buyer or seller depending on where the returns are. During the quarter, we also began deploying capital under our share repurchase program for the first time since the Board authorized it in August 2023. We repurchased approximately 187,000 shares for $400,000 at an average price of $2.14 per share. The dollar amount is modest relative to our liquidity, and that is intentional, but the signal is not. To frame what we see, we ended the quarter with $125 million in cash and marketable securities and a debt-free balance sheet.
We delivered our first positive adjusted EBITDA quarter in two years. We are raising guidance, as I will cover in a moment. In our view, the equity is currently trading at levels that ascribe little to no value to our cash position or to the underlying quality of the asset base behind it. We have meaningful capacity remaining under the repurchase authorization, which permits repurchases of up to the lesser of $55 million or 10 million shares. We will continue to be opportunistic with that capacity, particularly at levels where, in our view, the market is not reflecting the underlying value of the business.
Turning to our outlook for 2026, based on the operational performance we delivered in the first quarter and the momentum building across the platform, we are updating our 2026 guidance on two dimensions. First, and most importantly, we now expect Mammoth Energy Services, Inc. to be adjusted EBITDA positive for the full year of 2026. This is a full year ahead of the timeline we previously communicated. The pull forward is being driven by stronger-than-expected performance in rentals, particularly aviation, combined with continued discipline on the cost structure and the early benefit of the operational fixes we put in motion last quarter.
Second, we now expect full-year revenue growth of greater than 60%, up from our prior expectation of approximately 50%. Again, the primary driver is rentals, where utilization continues to build as we place additional assets on lease, supplemented by sequentially improving performance in drilling, sand, and accommodations. To close, the first quarter of 2026 marks a clear inflection point for Mammoth Energy Services, Inc. We delivered our first positive adjusted EBITDA quarter in eight quarters. We accelerated our path to full-year profitability by a full year. We began deploying capital under our share repurchase program for the first time since it was authorized, and we did all that with a debt-free balance sheet.
That said, there is more work ahead, particularly on margin improvement in sand and drilling and on scaling infrastructure, and we remain focused on executing against those objectives. The transformation strategy is working, and we are well positioned to build on this momentum through the balance of 2026. The job is to execute. We look forward to updating you next quarter. On behalf of the entire Mammoth team, thank you to our employees for their continued commitment and to our shareholders for their support. With that, operator, we will open the line for questions.
Operator: Thank you. Ladies and gentlemen, there are no questions at this time. I will now turn the floor to Mark Layton for closing remarks. Thank you.
Mark Layton: Thank you again for joining us today. The first quarter of 2026 was the quarter where strategy began to show up clearly in the numbers—positive EBITDA, strong revenue growth, disciplined capital allocation, and continued progress cutting costs. We look forward to updating you next quarter.
Operator: That concludes today’s call. All parties may disconnect. Have a good day.
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Mammoth Energy (TUSK) Q1 2026 Earnings Transcript was originally published by The Motley Fool
